Zoho Founder Sridhar Vembu On Zoho’s 21 Years, The Culture, Anonymous Open Houses And More

We Have Build Zoho As Not Just A Company But Also As A Community. Sridhar Vembu, CEO, Zoho

If Sridhar Vembu, founder of SaaS unicorn Zoho, ever got down to listing his credentials, it would probably read like this –

Building SaaS software from the heartlands of rural India? Check.

Making an operating system available for business enterprises at $1 a day per user? Check.

Building a global enterprise software company with annual revenues of more than $300 Mn without VC money? Check.

Transforming Chennai into a SaaS hub? Check.

Running a bootstrapped company which has been profitable every single year for the last 21 years? Check.

Sridhar Vembu, the man behind the rapid rise of Zoho, is all this and much more. As one founder aptly remarked at the launch of Zoho One last week in Chennai,

“You can learn more about enterprise software by listening to Sridhar Vembu for one hour than reading hundreds of books on the subject!”

And we could not agree more. Starting from humble roots, Sridhar has relentlessly striven to accomplish more with technology and eventually bootstrapped a company that was profitable from the first year of operations and continues to do so 20 years on.

Zoho now employs 5000+ people, generates hundreds of millions of dollars in annual revenue ($310 Mn is estimated revenue for the fiscal year ending in March) and has transformed Chennai into India’s SaaS hub while running its own Zoho University. Sridhar is a hard man to catch as he shuffles between India and US whilst running this software behemoth. But, we at Inc42 finally got an opportunity to connect him directly to our readers in a Facebook Live AMA. Watch the full video of Sridhar Vembu’s AMA below.

Here are some of the most interesting insights from Sridhar Vembu’s AMA with Inc42.

21 Years Of Zoho

Inc42:When did this idea of creating Zoho One come into your mind? As Google, Microsoft are all figuring out the integrated approach, Zoho has already leapfrogged into it. So, will Zoho be teaching others in the market?

Sridhar Vembu: I won’t presume to teach Google, Microsoft. But we have been thinking about Zoho One since the last 10 years. So, even when we launched our first product Zoho Writer 12 years ago, it was obvious we were not going to stop with a Word Processor. When you do a word processor, all the other stuff is suggesting itself. And we diligently set down to develop a full suite. Along the way, we also used this as the company grew. When we started Zoho, we were 300 people. Today we are 5,000 people. So, that growth process has also helped the growth of the suite, because, now we have an audience to test it and debug it before it goes live. Every product goes from a month to three months of internal trail before we actually launch it publicly. So, that’s how we built it and it was obvious that it was to be packaged together as a fully coherent operating system. The vision was there, it just took this long to get it all right.

Inc42: What have been some of the highlights of Zoho’s 21-year journey?

Sridhar Vembu: If you look at the 21-year-old journey; we went through an initial dot com bubble. That was a period of hyper growth with money flying in from everywhere. Then the bust arrived for two years. And those were very educational moments. And you learnt that you never want to take the good times for granted. There will be hard times and you have to go through them. We decided to move aggressively into the cloud space and we acquired the domain Zoho.com in 2003 and launched Zoho Writer in 2005. We always had a series of products in our mind. That’s somewhere when Google also entered the office suite online. We realised that having them as a direct competition in the office suite is going to be a losing proposition.

We decided to get our business app strategically right and I remember thinking that it will be tough to compete with Google but not tough to compete with Salesforce. That’s when we moved into CRM, which became the blockbuster of our success. Had we just stuck to office in fighting Google, we would have spent billions of dollars in marketing. But by finding other opportunities, CRM in particular, we were able to carry forward the R&D in office and build a business alongside. Then this whole thing has come together as a whole suite.

Inc42: As a new company how did you get your first 10 customers in a new market?

Sridhar Vembu: For any new product we launched, we go through the same phase. Of course, now we have a large customer base, so we send them an email or notify them through traditional methods. One thing to understand is that if you are in a hyper crowded market where there are 100 vendors and you are the hundred and first, it is going to be hard. You have to find what is your differentiation, what is currently lacking, what’s better about your solution. Even Zoho still has to demonstrate why customers should pick up our products compared to other competitors. That remains true for any startup. If you have a good answer to this question, you will be able to find those, 10, 100, 1,000 customers.

Inc42: Why did you decide to forgo conventional vendor pricing strategies with Zoho One like add-ons, renewals?

Sridhar Vembu: We look at how we want to use the software. Would we like to go to Microsoft and ask permission for everything? And when we ask for an add-on price negotiation is involved. We don’t like to do business that way and we would not want to be treated that way. That’s why we make it as simple as possible for our customers – open up the entire suite, keep the price very nominal, very clean, so their employee base can use whatever products they like.

The Zoho Culture

Inc42: Every company has its own culture and Zoho being a bootstrapped company will have a different culture than that of an investor-backed company. What are the core philosophies of Zoho’s culture and how do you preserve it when you grow from a few hundred employees to thousands?

Sridhar Vembu: We don’t think of Zoho just as a company but also as a community. Which means we place a lot of importance on not only hiring people but keeping them for the long haul. I don’t like this culture of every three years you are replacing the entire employee base. We have a model where we hire to keep people. And of course people are free to leave, but we really hope that we can retain them.

That, in itself, makes us to not adopt a lot of formal processes. So, you can actually do something about heavy processes. Without some kind of continuity for 10-15 years, I don’t think if you can call something a culture. You cannot replace people every two years. Take a bus, for instance. A bus does not have a culture-every night there is a different set of travellers on it. So that’s what we decided-are we going to be a bus or a community?

Inc42: What do you look for in a potential candidate while hiring at Zoho?

Sridhar Vembu: We disregard formal credentials for the most part. In fact, we are just going to start a hiring campaign where our ads wills say that ‘Zoho doesn’t care if you have a degree, you can apply.’ We want to change the way it is done. We know it really doesn’t matter what grades they’ve got and five years later no one will care about them. So why do we have to pretend that they matter when we are hiring? We do not recruit from the best universities. It’s the opposite in fact.

We have never gone to IIMs or ISB or IIT. Nothing against them, as I am myself from IIT. If I have to be prejudiced against them, I have to be prejudiced against myself. We want to hire people for whom our existence makes a difference. What I mean is, that, if we disappeared tomorrow, our current employees will miss us. IIT students will find a job anyway. They won’t miss us. So, why not make our existence matter somewhere? These employees are the ones to whom you matter the most. So, they are your natural audience- be it for hiring or customers.

Inc42: Tech guys move around for faster, higher salaries. How do you manage to nurture them?

Sridhar Vembu: It comes down to your culture. Tech guys move around a lot because all the companies look indistinguishable to them. If someone is paying you more, why not leave? But, if you have a strong culture that people can identify with, they won’t. This is how I look at it, look at things people do voluntarily on their own time without money involved. They identify with those things.

If a job does not create that identification, then you are going to have attrition. No matter how much you pay. Pay is only a partial motivator. As the old saying goes,“man does not live by bread alone.” So, if you are only trying to motivate a person with money, it will fail. There has to be a broader meaning to it. And that boils down to the culture.

SaaS And The Indian Startup System

Inc42: Are you planning to use AI / ML for enhancing Zoho functionalities? Where do you think the next disruption in SaaS lies, Voice, AI, VR?

Sridhar Vembu: As a matter of fact, we are already doing that now. We launched Zia – an AI powered sales assistant in CRM eight months ago and it has been received well. We are expanding the scope of it. We have a strong LABS team where we are pursuing ML, NLP, and all of those processes.

But I try not to procrastinate all of these. Honestly, it could be any of the above or all of the above. Sometimes you are lucky and get it early. Sometimes, you are late and something becomes big. If your business is dependent on foretelling the future, it doesn’t work. None of us are astrologers!

Inc42: How do you see enterprise SaaS products scaling in a country like India where there are extreme challenges in technology?

Sridhar Vembu: Five-six years ago, no one would have thought the smartphone would take off in India in such a big way. So, likewise, internet penetration is spreading fast. There are structural forces, for instance, GST. So, a lot of retailers who think of themselves as phobic now have to resort to it as tech is the best way to do GST. In the same way, going digital, cashless, will help. It is not merely a technical challenge for SaaS companies but a matter of cultural adoption and one has to ride that wave of cultural adoption to grow.

Inc42: What’s your take on the Indian startup tech system? Is there something that is a common problem in the system?

Sridhar Vembu: As I mentioned, there is an excessive worship of credentials in hiring and people want marquee talent from famous schools. They will justify it as saying they want people to hit the ground running. That reminds me of a treadmill and I reject that thought. We are not in a race against someone. We are only in a race against ourselves.

Steve Jobs said it best, “The thought that we are surely going to die is the most liberating thought in the world.”

So, why obsess so much about all this? So, I think we should take a moment to think what do we want out of our lives and then align your company, your business around those things. If people did that, they would find more meaning in work; they would not have to seek that exit.

Inc42: What would you tell startups who are confused between raising VC money or bootstrapping?

Sridhar Vembu: I would say, don’t overthink it. Go outside your home and see the coconut vendor or the chai waala. They are bootstrapped. So, if you don’t overthink it, you realise that the chai waala is in business, maybe I can be in business too without outside money. Then you don’t worry too much about it. I used to look at them for inspiration, I still do, it’s important to not overthink these things.

In conclusion, Sridhar Vembu’s advice to SaaS founders was to focus on customers wherever they may be, focus on having an evolving differentiation, and try to conduct anonymous open houses! While 12 years ago, having a product on the cloud itself was a differentiation. Today, for Zoho, it is in having the widest and deepest most integrated suite for business. Business is always a constant quest for differentiating yourself. If one doesn’t, the business is eventually bypassed by companies with a better idea!

Author

Passion for writing and interest in the start-up space brings Shweta to Inc.42. She has prior experience as a Research Analyst in the venture capital/ private equity space and the auto industry. Fiction writing is her other forte and her first book titled One Hundred Days published by Tara Press debuted in 2014.